Arm Holdings, the British technology group, has produced a low-power computer chip capable of connecting traffic lights, parking meters, fridges and even forests to the internet.

Codenamed Flycatcher, the tiny semiconductor is Arm's bid to expand its empire from smartphones and tablet computers, where its designs already feature in 100% of the devices on sale today, to the "internet of things", the 50bn everyday objects which it is predicted will be connected to the internet by the end of the decade.

With connected parking meters, on trial in San Francisco, motorists can identify free spaces from their mobile phone, reserve the spot, and pay over the internet without having to scramble for loose change.

Internet-controlled traffic lights could be co-ordinated to ease congestion after accidents, or change to green to allow emergency vehicles and VIP motorcades fast passage through city centres.

Arm hopes its chip, which measures less than a millimetre square, will find its way into white goods and motors, as well as wireless sensors for home and office lighting, heating and burglar alarms.

Medical devices, such as stethoscopes or blood pressure and glucose monitors, could also use it to transmit information to the doctor's surgery.

Flycatcher, whose official name is the Cortex-M0+, is designed for devices which cannot be attached to an electricity supply and must run off batteries.

It could be attached to sensors on trees in the Amazon to monitor rainfall, or to irrigation pipes on African farms to reduce water wastage.

"By enabling the connection of everyday devices we are pushing the edge of the internet out," said Arm director Gary Atkinson. "By connecting rooms or motors to the internet, you could significantly reduce the amount of energy consumed worldwide." Atkinson said around half of the world's electricity is used by motors, many of which have an efficiency rating of between 40% and 85%.

Arm, which designs rather than manufactures chips, already produces micro-processors for washing machines, street lights and motors. But the new microcontroller is 50% less power-hungry, cheaper and faster at processing information. It is one of a new generation of 32-bit micro-processors, also produced by Renesas Electronics Corporation in Japan and Microchip Technology in the US, which can run for years at a time without needing a change of battery.

Inhabiting devices which automatically switch power off when not being used, the speed at which they process and transmit information, via Wi-Fi or a mobile phone signal, is crucial. To save energy, power can be switched off many times a second, or for hours at a time.

Today, there are an estimated 12.5bn internet connected devices, an average of two per person, and many of these are phones or computers. In 2025, according to IT firm Cisco, there will be 1 trillion such devices.

While earlier Arm micro-processors cost half a dollar each, the new microcontroller design will be closer to 20 cents (13 pence).

The product will see Arm pitching for a share of the entire $15bn micro-controller market, Atkinson said, rather than the third it addresses today. The group's royalty revenues from such units totalled $16m in 2010, out of total royalties of $335m, but Morgan Stanley forecasts this will more than double to $37m by the end of 2012.

• This article was amended on 4 April 2012 to delete a line saying that Arm has been producing 8 and 16-bit micro-processors since 2007. Arm has not produced 8 and 16-bit technology.